The world needs big, audacious solutions to the thorniest problems impacting humanity. Problems like climate change, space exploration, oceanic exploration, food shortages and mass violence require government, nonprofits and private enterprises to develop solutions. For the commercial sector, this means a new era of thinking about innovation and commercial opportunities particularly for entrepreneurs.
We are seeing the end of the entrepreneurial era that defined the past 30 years. The young upstart college student is not the person best endowed to solve humanity’s biggest crisis. It takes a team of seasoned experts and entrepreneurs to build these new dynamic businesses.
Until now, these challenges have been approached either by the in-house “X” programs of the major tech players, or by dwindling government programs. While both of these avenues for development are still relevant and necessary, venture studios are uniquely suited to the current challenges we face in innovation. Unlike VC firms and accelerators that recruit startups and fund them for fast growth in exchange for equity, venture studios are companies (mostly built up of experienced entrepreneurs, innovators, and investors) that have the funds, in-house expertise, and patience to build their own startups from scratch.
By leading with fresh approaches and ideas, venture studios effectively combine the disruptiveness of a startup with the necessary stability of a team and resources to build companies that require decade long roadmaps before profitability and deft maneuvering of public and private opportunities.
Here’s why they are filling an important role:
1. Our current model won’t develop the next big businesses
The current investment model doesn’t support the types of businesses needed to take on our biggest problems. Here’s why:
- VC today has moved to later rounds.
- It’s taking fewer early risks.
- It’s model does not necessarily work the kind of big idea, research-driven solutions that we need to be developing.
The standard 10-year horizon with an emphasis on exits simply was not designed to support the kind of tech company incubation we need.
Venture studio funding rethinks this relationship. At the financing level, firms like Obvious Ventures, Atomic, or Science are providing the funding to get companies off the ground, but also enacting a much more hands-on and collaborative approach. This new approach makes their investment safer and supports entrepreneurs who need more time to develop new solutions.
It’s no longer the era of fail fast and break things. That model puts humanity at risk. Instead, we are entering an era of sustainable development of technology that provides long term value-based businesses. No one wants to fail fast in space, because the cost then is human life and our ability to sustain our species.
2. They create competition with monolithic brands
The collaboration focus of venture studios allows for the horizontal integration of technology. This removes the typical silos of development and allows for faster technology acceleration through multiple use case testing grounds. Deep tech and science research can be incubated and applied, much like SRI International’s model that produced multiple AI innovations, including Siri. Collaboration breeds technology leaps at scale.
Furthermore, the venture studio model allows for competition with large technology companies like Alphabet and Facebook. Innovation stymies when it’s left in the hands of those owning monopoly markets. To ensure America’s competitiveness, development shouldn’t be left just to these corporations. We need a mix of Alphabet’s Sidewalk Labs, independent companies like Idealab, and venture studios like Sidebench and Prehype. We need more of all of them. It’s the only way we will truly have diverse and impactful solutions to solve big problems.
3. They deliver better training and entrepreneurship models
There is no shortage of good ideas, but the execution required to create a successful company is an entirely different ballgame. Accelerators like YCombinator, 500 Startups, and Techstars have helped foster quick-start models to get would-be entrepreneurs from idea to market and have of course helped create some notable companies. But the venture studio model cultivates better entrepreneurs by providing them with more integrated resources, expertise, technologies, and perhaps most importantly, time. Like entrepreneur-in-residence programs, these studios match experienced operators with a company ready to take on a market.
The old model isn’t built for deeply researched science and tech innovation. And mentorship-focused accelerator programs aren’t always the best for training future entrepreneurs. There is a reason that even a leading accelerator like Techstars has ventured into the studio model. (Interestingly, when venture studios were just emerging, Techstars founder Brad Feld largely dismissed the model.)
Successful venture studios, like BetaWorks and Tangelo, have created new programs that cultivate better entrepreneurs in addition to technologies. This is central to developing a company that can have a real impact in the world.
It’s not just today’s business and funding climate that makes the venture studio model more relevant. It’s also the necessity of solving the problems we’re facing. When we talk about building startups, we are really talking about building sustainable innovations and disrupting traditional ways of doing things.
The venture studio model isn’t necessarily the best model for startup creation, but it’s certainly the model we need most right now.
Ben Lamm is a serial entrepreneur. He is founder and CEO of Hypergiant. Previously, he was founder and CEO of Conversable, acquired by LivePerson; founder and CEO of Chaotic Moon Studios, acquired by Accenture; and a founding partner at Team Chaos, acquired by Zynga.